Fed rate hike likely in June
WASHINGTON — Most Federal Reserve monetary policymakers indicated they were ready for another small interest rate hike — perhaps as soon as next month — if economic data strengthened as expected following a weak winter, according to an account released Wednesday of their most recent meeting.
Fed officials also considered a plan to start reducing the $4.5 trillion in Treasury and mortgage securities and other assets the central bank has purchased since 2008 in an attempt to stimulate the economy.
The plan, which they said likely would begin later this year, would involve slowly allowing some of the maturing securities to be cashed in instead of reinvesting the money in new securities, the meeting minutes showed. The goal would be to avoid roiling financial markets and causing interest rates to jump.
Such a plan would take place if the Fed continued to nudge up its benchmark short-term interest rate this year, according to the minutes. And despite the economy’s slow growth over the winter, policymakers indicated they were on pace to do so.
U.S. stocks rose for the fifth consecutive day Wednesday as investors went on a late buying spree after news that the Fed plans to start reducing its portfolio of bonds. The Standard & Poor’s 500 index closed at a record high.
Analysts said the minutes showed the Fed remained on track for at least two more rate hikes this year.
Minutes of the meeting, released with the usual three-week delay, said policymakers “judged that it would be prudent to await additional evidence that the recent slowing in the pace of economic activity had been transitory” before hiking the rate again. A sign of that came two days later when the Labor Department reported job growth rebounded strongly in April.